On April 1, 2019, the U.S. Department of Labor announced a proposed rule to revise and clarify the responsibilities of employers and joint employers to employees in joint employer arrangements. The Department has not revised its joint employer regulation in more than 60 years.
Who Will This Proposed Rule Affect?
The revisions could have significant implications for employers across all industries, and particularly in the hospitality industry, including franchisors, taverns or clubs operating in partnering arrangements with employees, or utilizing contractors and staffing firms, as well as those engaged in providing temporary and other contingent workers.
What Is Changing?
The Fair Labor Standards Act (FLSA) allows joint employer situations where an employer and a joint employer are jointly responsible for the employee’s wages. This proposal would ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek.
Under the new rule, a four-factor test would be used to determine whether a potential joint employer actually exercises the power to:
- Hire or fire the employee.
- Supervise and control the employee’s work schedules or conditions of employment.
- Determine the employee’s rate and method of payment.
- Maintain the employee’s employment records.
The proposal provides guidance on how to apply this test; explains what additional factors should and should not be considered; and clarifies that a particular business model, certain business practices and certain contractual agreements do not make joint employer status more or less likely. The proposed rule includes nine examples showing how the new rule would apply in various scenarios.
According to the DOL, it designed the proposed new rule to “reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections, promote greater uniformity among court decisions, reduce litigation and encourage innovation in the economy.”
The Notice of Proposed Rulemaking on Joint Employer Status can be viewed on the DOL’s website: https://www.dol.gov/whd/flsa/jointemployment2019/. The proposed regulation is subject to a 60-day public comment period and will remain open until June 10, 2019. We will continue to monitor this important development.
For more information regarding the impact of these changes, please contact Stephanie Ferrario, Keith Koszarek or your Wipfli relationship executive.